Changes to the Dodd-Frank Act have been discussed by politicians since passage of the Act in 2010. Those changes are now closer to happening with passage of U.S. Senate Bill S.2155 on March 14, 2018. What does the bill mean for community banks and the current regulatory environment? Here is a brief list that addresses those changes:
- Appraisals – Loans less than $400,000, secured by property located in a rural area, would no longer be required to have an appraisal. To qualify, these transactions must meet certain criteria such as documenting that no state-certified appraiser or state-licensed appraiser was available within five business days beyond current standards. These transactions also come with restrictions on the selling of servicing rights. The change would not impact high-cost mortgages, as defined by the Truth in Lending Act.
- Home Mortgage Disclosure Act (HMDA) – Mortgage originators with less than 500 closed-end transactions would not be required to file a loan application register (LAR). The current LAR filing threshold is 25 transactions and greater.
- Higher-Priced Mortgage Loans (HPMLs) and the Requirement to Escrow – Institutions with assets less than $10 billion would no longer be required to establish an escrow account for HPML loans. The current asset size threshold is $2,069,000. The threshold for first-lien closed-end originations would increase from 1,000 to 2,000.
- “No Wait for Lower Rate” – If a creditor offers a lower rate of interest after disclosing a previously higher rate, there would be no requirement to wait an additional number of business days before loan consummation.
This summary was derived from key aspects of the bill, Title I, Improving Consumer Access to Mortgage Credit, and is not all-inclusive. Title II, Regulatory Relief and Protecting Consumer Access to Credit, touches on several more areas that community banks could find favorable. There are six titles to the bill which includes protecting veterans and homeowners, protecting student borrowers and changes applicable to bank holding companies.
The bill now moves to the U.S. House for consideration.